FREEING UP SHARJAH

Setting up new free zones is the government's strategy to attract FDI and plug the gaps in developing its market.

Historically, free zones have proven to be the most efficient answer to the dilemma haunting Gulf states for past decades: how to diversify productive activities and overcome the economy's dependency on oil. It is no surprise, then, that Sharjah has ambitions to become a free zones hub and attract significant investment.

There are more than 37 free zones operating in the UAE, mostly based in Dubai. In Sharjah there are five free zones: the first two are the well-known Sharjah Airport International Free Zone (SAIF) and Hamriyah Free Zone (HFZ). Both established in 1995, combined they are home to 13,500 companies and have contributed hugely to Sharjah's industrial development.

The other three free zones were more recently established as part of the government's plans to develop Sharjah as a free zone hub. The third free zone, Sharjah Healthcare City (SHCC), was created in 2012 to operate under the Sharjah Health Authority. The SHCC intends to offer investors, companies, and individuals excellent investment opportunities in the field of healthcare, and incentivises such investments through regulations aimed at making the zone as convenient as possible.

The fourth free zone, Sharjah Book City, is a less-conventional type of free zone. Established in 2013, it is the Arab World's very first publishing free zone. “Sharjah Book City is going to be the publishing hub for the World,” said Ahmed Al Ameri, chief of the Book Authority. “It will bring together publishing, translation, and all aspects of the industry under one roof.” Given that Sharjah is also home to the Sharjah International Book Fair, a 10-day annual event that has been running since 1982, and is one of the largest book fairs in the world, this is a natural channel to pursue.

Earlier this year, a fifth free zone, Sharjah Media City, was established by royal decree as an independent corporate body to develop the country's creative industry and build manpower in the media and creative fields, and regional leadership in the field of creative media training. Providing a favorable environment, it is hoped, will support the development of creative, high-quality media at a reasonable cost. The tax and fee exemptions are expected to attract a new generation of media production in Sharjah.

A new free zone, the AUS Research, Technology and Innovation (RTI) Park, is already under development. The entity responsible for the project is the AUS Enterprises, a holding company established to develop projects for the American University of Sharjah (AUS). Phase I is expected to be complete by 2018 and will aim to attract 200 companies, with the overall aim of identifying research and developing future key markets for the UAE economy. In total, R&D in the UAE is very underdeveloped, with the country's GDP expenditure being only 0.49%, compared to a world average of 2%. The project is therefore not only in line with the government's push for investment, but also with its desire to use them to boost underpenetrated markets.

The cost of setting up a business in Sharjah is the lowest in the UAE, and coupling this with the Emirate's advantageous geographic position (it is the only Emirate with ports on both the western and eastern coasts) makes it an ideal place to establish free zones. Companies in HFZ and SAIF have long benefitted from low operation costs and easy access to the major markets in the Middle East and beyond. Now, the R&D free zone currently under development will bring such benefits to a much more advanced level, with far-reaching effects on the many other flourishing sectors of this promising economy.